U.S.-Japan trade: No strings

WASHINGTON - A real-world test of how much globalization has transformed the automobile industry begins now.

A five-year agreement aimed at boosting sales of U.S.-made vehicles and parts in Japan and reducing the automotive trade deficit between the two countries expired at the end of 2000. No talks are scheduled to revive it or create a new one.

The main issue: Will automotive trade between the United States and Japan run peacefully without government intervention?

Officials of the Japanese government and of Japanese automakers say no such agreement is needed. They say the old one served its purposes and that, more importantly, the industry has changed dramatically. U.S. and European companies, for example, have stakes in six of nine major Japanese automakers.

U.S. industry leaders generally don't expect sudden or dramatic changes in exports and imports to and from Japan in the wake of the pact's expiration, but they do anticipate renewed political strife over trade.

Norm Mineta, secretary of the U.S. Department of Commerce, said not enough has changed to keep automotive trade from becoming a contentious issue again between the two economic powers.

'If the Japanese refuse to engage on this issue, our overall trade relationship with Japan will rest on a very shaky foundation,' he said.

Deficit still big

The total trade deficit between the United States and Japan was about $70 billion in 2000. The automotive sector accounted for $45 billion, Mineta said.

After a period of decline the automotive trade deficit with Japan is larger than it was before the 1995 agreement. The only consolation is that the total U.S. international trade deficit has grown so much that the $45 billion figure is a smaller percentage of the total of about $400 billion.

But Mineta's concern won't matter for long. He is about to leave office, along with the rest of the Clinton administration, and a decision on whether to seek a new agreement to boost U.S. vehicle and parts sales in Japan will rest with the Bush administration.

Even if Bush isn't ready to address U.S.-Japan automotive trade immediately, there are plenty of others lining up to press him on the issue:

Lawmakers, especially Democrats and especially those from car-making states, say a tougher agreement than the 1995 deal is needed.

Sen. Carl Levin, D-Mich., for one, said, 'It is unacceptable that current Japanese auto and auto parts trade barriers continue to remain in place after decades of bilateral negotiations to remove them.'

UAW President Steve Yokich warned that if an acceptable new deal isn't reached, his union would use 'all available avenues, including U.S. trade laws, to create the fairness and balance in U.S.-Japan auto trade that has been absent for nearly 20 years.' Groups such as the UAW can ask the U.S. government to impose sanctions on 'unfair' trading partners.

With the World Trade Organization operating to settle international trade disputes, the use of unilateral sanctions is less likely but remains an option.

Organizations of U.S.-based suppliers say a new trade agreement should include better provisions to expand the sale of American parts to Japanese assembly plants in the United States and in emerging markets.

Gambling?

One Clinton trade official, who asked not to be named, said the Japanese rejection of the extension could prove to be a bad gamble.

He said: 'If the sector slows, the focus of the new Congress and the administration could be on the deficit, and how they choose to deal with that ought to be of concern to the Japanese.'